Foreign portfolio investors (FPIs) have been selling off Indian stocks aggressively since the start of the new fiscal year 2024-25 (FY25). This month, market volatility due to upcoming elections and a strict approach from global central banks has dampened investor sentiment and reduced activity in the domestic stock market.
According to data from the National Securities Depository Ltd (NSDL), FPIs sold ₹28,242 crore worth of Indian equities. When including debt, hybrid, debt-VRR, and equities, the total outflow stands at ₹27,082 crore as of May 17. However, there has been a small inflow of ₹178 crore into the debt market this month.
FPI Activity in Indian Markets
In early May, FPIs briefly turned net buyers in Indian equities, breaking their April selling streak, but continued selling in the debt market. Last month, they sold ₹8,671 crore in Indian equities and ₹10,949 crore in debt due to high US bond yields. However, in March 2024, they invested ₹35,098 crore in Indian equities, the highest in the first three months of 2024. Despite high US bond yields, FPIs became net buyers by the end of February 2024 after initially reducing outflows.
In February 2024, FPIs invested ₹1,539 crore in Indian equities and ₹22,419 crore in debt, following an investment of ₹19,836 crore in January. The inclusion of Indian government bonds in JPMorgan and Bloomberg debt indices spurred foreign fund inflows into the debt markets. In January 2024, FPIs became major sellers, ending their buying streak, after significant investments in December 2023, which followed three months of selling.
The strong global cues in December, when the US Federal Reserve hinted at ending its tightening cycle and raised expectations of a rate cut in March 2024, led to a drop in US bond yields and increased foreign fund inflows into emerging markets like India.
For the entire year of 2023, FPIs bought ₹1.71 lakh crore in Indian equities. Including debt, hybrid, debt-VRR, and equities, the total inflow was ₹2.37 lakh crore, according to NSDL data. FPIs’ net investment in the Indian debt market for 2023 was ₹68,663 crore.
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